A compact fluorescent light bulb is considered efficient as it uses less electricity thana tradtitional bulb to produce the same amount of light. Photograph: Graham Turner/Guardian

Energy efficiency means using less energy to provide the same service. For example, a compact fluorescent bulb is more efficient than a traditional incandescent bulb as it uses much less electrical energy to produce the same amount of light. Similarly, an efficient boiler takes less fuel to heat a home to a given temperature than a less efficient model.

The phrase 'energy efficiency' is often used as a shorthand to describe any kind of energy-saving measure, though technically it should be distinguished from energy conservation – a broader term which can also include forgoing a service rather than changing the efficiency with which it is provided. Examples of energy conservation include turning down a thermostat in the winter or walking to the shops rather than driving there.

Increasing energy efficiency often costs money up-front but in many cases this capital outlay will be paid back in the form of reduced energy costs within a short time period. This makes efficiency improvements an attractive starting point for reducing carbon emissions.

The scope of the savings – and the techniques required – depend on the situation and location. For homes in cool countries such as the UK, the most effective measures include increasing insulation, draught proofing, installing good-quality double-glazed windows and switching to more efficient appliances and light bulbs. The Committee on Climate Change (CCC) estimates that these improvements could reduce annual CO2 emissions from British homes by around 17 million tonnes by 2020 – around a tenth of the 2008 residential total.

By contrast, increasing efficiency in non-domestic buildings often means focusing on ventilation and air-conditioning, in addition to lighting, heating and appliances. Many such buildings have achieved savings of around 25% after undergoing a refit to increase efficiency.

Energy-intensive industries, such as iron, steel and cement manufacture, have become more efficient over time due to new equipment and better re-use of waste heat. For example, a hot pipe containing a chemical that needs to be cooled can be used to heat up other chemicals (this is known as 'heat integration'). Motors are used widely in industry for a variety of tasks, such as pumping, mixing and driving conveyor belts. The installation of efficient, correctly sized motors and drives can result in energy savings of 20–25%.

Vehicles have also become more energy efficient over the decades thanks to factors such as improved engines and lighter, more aerodynamic designs. The potential exists for further improvements and in EU the emissions of the average new car is set to decrease from 150 to 95 grams of CO2 per km by 2020. The CCC forecasts that the introduction of efficiency improvements to cars, vans and HGVs could reduce CO2 emissions in the UK by 12.3 million tonnes by 2020 – around 10% of total for surface transport in 2008.

Improving energy efficiency does not necessarily translate into reduced CO2 emissions: the savings depend on the situation. If the energy is supplied from fossil fuels – such as petrol in a car or electricity from a coal-fired plant – then improved efficiency will cut emissions. But if the energy is supplied by a low-carbon source such as electricity from nuclear or renewables, then improving efficiency may have little impact on emissions. (When comparing electric and non-electric appliances, it's important to consider the efficiency of the power generation, too: switching from a 90% efficient gas boiler to a '100% efficient' electric heater will increase energy use and emissions if the electricity comes from regular fossil fuel power plants, which themselves are highly inefficient, losing much of the energy in their fuel as waste heat.)

Energy efficiency is always a good idea. Whether it results in energy savings depends on what we do with the money we saved. In some cases, efficiency savings can be offset by changes in user behaviour – the so-called 'rebound effect'. One example would be that insulating a home may make it more economic for the resident to maintain a higher temperature, increasing the standard of comfort but reducing the energy savings.